Many FTSE 100 stocks are global – companies based in the UK with operations around the world. As such, many have exposure to economic developments and trends outside of Britain. In terms of big economic trends, a very promising one is the continued development of India’s economy.
India has a lot of potential. The country has more than 1.3bn people and its economy is growing rapidly, when excluding the impact of the coronavirus.
Because of this growth, Bloomberg Economics estimates that India’s economy will become an ‘upper-middle-income’ one sometime in the next 10 years. By 2030, India could also have a nominal GDP of $8.4tn and a GDP per capita of around $5,700.
Even better, India is open to Western investment. This means many Western companies can gain market share in the country and realise some of the benefits of the increase in Indian incomes. Given the huge potential growth, India’s rise could be good news for a number of Western stocks.
Here are three names that I think will benefit from India’s rise.
The first FTSE 100 share that I think could benefit from India’s development is AstraZeneca (LSE: AZN). Although India is among the world’s leaders in generic drug manufacturing, the country hasn’t caught up yet in terms of making home-grown medical blockbusters.
The R&D lag, India’s huge population, and its increasing middle class translate into a great opportunity for AstraZeneca to realise substantial growth in the country in the next 10 years. Before the coronavirus outbreak, AstraZeneca’s business in India grew rather quickly. According to a recent investor presentation, a subsidiary of AstraZeneca, AstraZeneca India, realized 17% sales growth for FY 2019–20.
Once the world recovers from the outbreak, I think AstraZeneca’s operations in the country will rebound and eventually be a key component of the company’s global business.
Reckitt Benckiser is another FTSE 100 stock I think will benefit from India’s rise. In terms of Covid-19, the outbreak has prompted many Indians to stock up on hygiene and disinfectant products such as Lizol. That’s good for Reckitt Benckiser because once people use the company’s brand, they often continue to use it.
In addition to Lizol, Reckitt Benckiser plans on introducing more of its brands into the country. More brands, and India’s fast economic growth could help Reckitt Benckiser profits grow for the next 10 years.
A third FTSE 100 stock I think that will benefit from India’s development is Unilever. Due to Unilever’s focus on emerging and developing markets, I think the company will have a good shot at winning over many of the new Indian middle class and many of those customers will be loyal for a long time. Around 60% of Unilever’s business comes from emerging and developed markets.
Demographics isn’t the only reason to like Unilever. The company also has an attractive valuation versus other leading consumer staples such as Proctor & Gamble. Whereas P&G trades for a forward price-to-earnings multiple of around 24.5, Unilever trades for around 20.5 times forward earnings estimates.
The post 3 FTSE 100 stocks I’d buy to play India’s rise appeared first on The Motley Fool UK.
Jay Yao has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020